Ircon International Limited (IRCON)

NTPC Limited (NTPC)

WEEKLY VIEW OF THE MARKET

IIndian markets ended the week on positive note once again with Nifty reclaiming 10100 levels on the back of sharp surge in banking stocks after State Bank of India posted good quarterly numbers and surged nearly 8% in single trading session. From derivative front, put writers are now shifting to higher band which suggests rally to continue in coming sessions as well and bulls are likely to keep control over the markets. However, from technical front, now 10250 level would act as immediate hurdle for Nifty as 200 days exponential moving average is placed on weekly charts, above which further upside can be seen till 10400 level as well. On the downside, now 10000 would be crucial support and will act as psychological level for Nifty. The Implied Volatility (IV) of calls closed at 27.62% while that for put options closed at 28.57%. The Nifty VIX for the week closed at 29.69% and is expected to remain sideways. PCR OI for the week closed at 1.68 up as compared to last week at 1.52 which indicates more put writing than call. For coming week, we believe that any dip into prices should be use to create fresh longs as bias is likely to remain bullish for Nifty.

DERIVATIVE STRATEGIES

NIFTY OPTION OI CONCENTRATION (IN QTY) (MONTHLY)

CHANGE IN NIFTY OPTION OI (IN QTY) (MONTHLY)

BANKNIFTY OPTION OI CONCENTRATION (IN QTY) (MONTHLY)

CHANGE IN BANKNIFTY OPTION OI (IN QTY) (MONTHLY)

SENTIMENT INDICATOR (NIFTY)

SENTIMENT INDICATOR (BANKNIFTY)

FII’S ACTIVITY IN INDEX FUTURE

FII’s ACTIVITY IN DERIVATIVE SEGMENT

Top 10 Rollover

Bottom 10 Rollover

SPICES

Turmeric futures (June) is taking support near 5200 levels since past four weeks & in days to come it is expected to hold the same. Regarding price outlook, it is expected to show an upside momentum towards 5650-5800 levels, on account of lower level buying & increased consumption for the purpose of medicinal use. In this pandemic, the HoReca industry has appended their menu, for immunity of the consumers. The eating habits of people have taken a turnaround sharply, which has prompted to venture into healthy foods &turmeric is proving to be a standout ingredient. A coffee chain in India has introduced turmeric latte to boost body’s immunity, while a milk federation in the South India has launched turmeric milk to lower the risk of infections & disease. Jeera futures (June) is expected to trade sideways in the range of 13500-14300 levels. Demand from bulk buyers is sluggish as they are buying limited due to financial problems and uncertainty because of coronavirus.Cardamom futures (June) may continue to take support near 1520, while the upside may get extended to 1650-1700 levels. Cardamom auctions at Bodinayakanur, resumed after a gap of more than 80 days, has registered aRs.50/kg increase in prices compared to the previous auction in Puttady.The rise in prices is being attributed to quality arrivals with graded materials (7-8 mm capsules) and better participation of Tamil Nadu dealers. Also, the exporters are getting increased enquiries, which is a positive sign for the revival of the market. Dhaniya futures (June) is likely to witness a plunge & test 5300-5200 levels. The bearish sentiments are being added by higher crop estimate and rise supply of the spice increased in spot markets.

BULLIONS

Bullion posted a correction in the previous week amid an improvement in risk sentiment as the government announced more steps to reopen the economy. However a weak dollar and lingering US-China tensions continue to support gold’s haven demand. Meanwhile, investors may take a cautious stance on the hopes of a quick economic turnaround. However, investors are still waiting to see whether the easing of restrictions will lead to a second wave of infections, supporting demand for gold. The World Gold Council said that Gold-backed exchange-traded funds (ETFs) added 623 tonnes of the metal worth $34 billion to their stockpile from January to May, exceeding in five months every fullyear increase on record. Meanwhile the European Central Bank raised bond purchases by 600 billion euros ($674 billion) to 1.35 trillion euros and extended their duration, briefly boosting equities. U.S. weekly jobless claims dipped below 2 million for the first time since mid-March. Re-igniting worries about an economic slowdown, the U.S. trade deficit surged in April as the COVID-19 pandemic upended the global flow of goods and services, pushing exports to a 10-year low. The dollar also held near its lowest level in about three months, making gold cheaper for holders of other currencies. Based on weekly charts there is still room for correction in bullion counter. For the coming week, gold may trade in the range of 45300-47100. Silver may trade in the range of 45300-48200. U.S. Federal Reserve’s two-day policy meeting next week is also on investors’radar. More stimulus and lower interest rates tend to benefit gold, which is often seen as a hedge against inflation and currency debasement.

OIL AND OILSEEDS

Soybean futures (June) is looking bullish & may move higher towards 4000- 4040 levels, taking support near 3820 levels. The counter is taking positive cues from the international market, wherein U.S. soybean futures hit their highest levels in nearly two months on the back of a weaker dollar bolstering export prospects for U.S. oilseeds. U.S. soybeans are now cheaper than those from Brazil, so that should help U.S. exporters to increase sales. The rally of mustard futures (June) may get extended to 4700 levels on the back of higher demand against lower supplies. Crushing of mustard seeds by mills in India rose 6.7% on year to 800,000 tn in May. Relaxations in the nationwide lockdown primarily in key mustard producing regions ramped up crushing of the oilseed. The easing of the lockdown for farm sector accelerated pace of transportation of the crop from farms to mandis, and from mandis to oil mills. Crushing is likely to gather momentum following further relaxations in the lockdown effective from Jun 8. Soy oil futures (June) may continue to trade with an upside bias taking support near 785, while the upside may get extended to 840 levels. While restaurants have started functioning at several parts of the country, the consumption of edible oils may increase from here, and steadily it will return to pre-covid levels.CPO futures (June) is expected to surpass the resistance near 670 & trade further higher to test 680-690 levels. The latest statistics show that imports are lowest in May month since 2011. Also, the sentiments of market participants are optimistic as Malaysian palm oil is on a bullish track on signs of improving demand as more countries ease coronavirus-induced lockdown restrictions.

ENERGY COMPLEX

Crude oil for coming week may trade with bullish bias. Crude Oil prices had corrected in the previous week as markets wait to see whether major producers will commit to an extension of record production cuts to support oil prices. Still, both benchmarks are set for a sixth weekly gain on the back of output cuts and signs of improving fuel demand as countries begin to ease restrictions to prevent the spread of the coronavirus. WTI is up nearly 5%, while Brent has risen about 13%. The OPEC+ had been expected to meet on June 4 to discuss extending output cuts, but the meeting was delayed amid talks over poor compliance by some producers. It is unclear when they will meet, but three OPEC+ sources said they could still hold a ministerial video conference on June 6 or June 7. The growing fear is that not only will a deal to extend the deep cuts not be reached, but producers may even relax their current over-compliance. This would ultimately see output rise in coming weeks. Crude may take support near 2560 whereas if prices continue to sustain above 2780 may extend the bullish rally towards 3050. The amount of natural gas flowing on pipelines to U.S. liquefied natural gas (LNG) export plants plunged to a 13-month low in June, a signal of weak worldwide demand due to government lockdowns to stop the spread of the new coronavirus. The price action on the weekly chart displays a pattern of marginally higher lows since late March which is suggesting base is forming around 120 in MCX. Natural gas may continue to trade in the range of 125-149.

OTHER COMMODITIES

Cotton futures (June)will possibly witness remain stable & trade with a positive bias in the range of 15900-17000 levels. With lockdown phase witnessing ease in many states across India and the textile units started their operations, demand for cotton is likely to rise in days to come. Several textile and apparel companies are taking innovative approaches to surviving the crisis while also helping to address the global shortage of personal protective equipment (PPE) by repurposing their manufacturing facilities. Chana futures (June) is expected to trade higher & test 4250-4300 levels, taking support near 4140. Riding on the hike in MSP and increased demand from millers, uptrend is being witnessed in most of the pulses at the mandis in Indore. Moreover, the major factor that will boost the demand is the decision taken by the Union Cabinet by bringing amendment to Essential Commodities Act, removing many commodities, including pulses from the list of essential commodities.The Cabinet also approved ordinances to remove restrictions on farmers selling their produce outside notified market yards, as well as to facilitate contract farming and allow farmers to engage in direct marketing. The supply pipelines, which have become empty, will also start filling up gradually, bringing some demand. Despite strength witnessed in mentha oil futures (June) during past trading sessions, the upside may remain capped near 1120, as the fundamentals are not supportive enough to add further gains to the counter. The export demand has been affected due to this lockdown due to regulations regarding the movement of vehicles. There are problems in arrival of raw materials and delivery of other finished goods.Due to lack of movement & export orders, most of themare operating at low capacity.

BASE METALS

Base metal prices may trade on firm note. Copper may move towards 435 levels while taking support near 419 levels. The Prices may get support on hopes of improving demand for the red metal amid more stimulus measures by many economies that reopened after months of lockdowns but rising tension between U.S.-China over Hong Kong and trade may hamper sentiment already marred by the pandemic. Manufacturing activity is recovering from its February meltdown and both the official and unofficial purchasing managers indices (PMI) are bouncing back into expansionary territory. The Caixin China services purchasing managers index (PMI) rose to 55 in May from 44.4 in April. Bonded warehouse copper stocks in China rose by 2,000 tonnes to 212,000 tonnes last week, according to Shanghai Metals Market, representing the first rise in nine weeks. Zinc may move towards 168 and taking support near 159. Chinese imports of zinc contained in zinc concentrates jumped 27.8% to 479,000 tons, while its net imports of refined zinc metal fell 50.8% year over year to 68,000 tons. Lead can move towards 145 while taking support near 133. The prices may get support on lower production. Global lead metal production fell 7.1% to 2.7 million tons. Nickel may trade with bullish bias where it may test 990 and taking support near 952. Indonesia will keep in place a ban on the export of nickel ore even as it relaxes exports of some other minerals under revisions to its mining law, the country’s energy and minerals ministry said. Aluminum may move towards 137 while taking support near 132. Global aluminium producer has offered Japanese buyers a premium of USD 85 per tonne for July-September, up 3.7% from the current quarter.

TREND SHEET

TECHNICAL RECOMMENDATIONS

COPPER MCX (JUNE) contract closed at Rs. 423.65 on 04th June’2020. The contract made its high of Rs. 429.50 on 05th June’2020 and a low of Rs.380.00 on 22nd Apr’2020. The 18-day Exponential Moving Average of the commodity is currently at Rs.414.52 On the daily chart, the commodity has Relative Strength Index (14-day) value of 69.45.

One can buy around Rs. 422 for a target of Rs.445 with the stop loss of Rs.413.

ZINC MCX (JUNE) contract closed at Rs. 161.45 on 04th June’2020. The contract made its high of Rs. 163.80 on 05th June’2020 and a low of Rs. 145.30 on 22nd Apr’2020. The 18-day Exponential Moving Average of the commodity is currently at Rs. 158.55 on the daily chart, the commodity has Relative Strength Index (14-day) value of 62.72.

One can buy around Rs.157 for a target of Rs. 172 with the stop loss of Rs. 152.

CPO MCX (JUNE) contract was closed at Rs. 653.70 on 04th June’2020. The contract made its high of Rs. 670.90 on 16th Apr 2020 and a low of Rs. 557.40 on 07th May’2020. The 18-day Exponential Moving Average of the commodity is currently at Rs. 642.11 on the daily chart, the commodity has Relative Strength Index (14-day) value of 54.68.

One can buy at Rs. 640 for a target of Rs.675 with the stop loss of Rs 627.

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NEWS DIGEST

• NSE and BSE are launching Gold Mini Option from this week.

• The government gave several landmark decisions to benefit farmers: Regulatory environment liberalized for farmers through amendment to Essential Commodities Act, Ordinance to promote barrier-free inter-state and intra-state trade in agriculture produce approved, Farmers empowered to engage with processors, aggregators, wholesalers, large retailers, exporters.

• The government decided that farmers, who availed short-term crop loans at a concessional rate of 4 per cent per annum and missed their repayment after March 1, can now repay by August 31 without paying any penalty.

• The Cabinet Committee on Economic Affairs (CCEA) approved an increase in MSP for all mandated kharif crops, for the 2020-21 marketing season.

• MCX has restored the second session of agricultural commodity trading up to 9 pm with effect from 2nd June, 2020.

• India is temporarily reducing import tariffs on lentils (Masur) originating from most countries.

• MP has extended the procurement period for chana, masur and mustard harvested in 2019-20 (Jul-Jun) to Jun 10 from May30.

• India's May 2020 edible oil imports reported at 707,478 tons compared to 1,180,789 tons in May 2019 down by 40%, on YoY basis: SEAof India.

• China’s gold sales jumped 54% in May compared with a month earlier. - China Gold Association.

WEEKLY COMMENTARY

Range bound movement was noticed in the commodity market on mixed news. Gold prices saw saturation on higher side and dipped down marginally as world got some better numbers in economic releases. It ignored all negative news like tensions between the two countries have flared up since China approved national security laws for Hong Kong and Macau at the end of May. U.S. suspended flights into the U.S. by Chinese airlines with effect from June 16. Some lower level buying was seen in dollar index and this also stimulated selling. It breached the mark of $1700 in COMEX and 47000 in MCX. Silver too saw some profit booking from higher levels. Crude oil enjoyed more upside despite so many geopolitical tensions. Both WTI and Brent are down 40% on the year. But the U.K. benchmark is also up more than 100% from the end of April. Its U.S. peer has gained 260% in a rally that increasingly feels out of step with market realities that have evolved since WTI’s crash to subzero prices in late April. Here on MCX it was just few points away from 2800 mark whereas WTI traded near $37 in NYMEX. On the later part of the week, we witnessed some correction as market was expecting that OPEC+ may not take more aggressive decision on production cut as earlier as prices revived. Base metals prices revived on better manufacturing activities in China. China’s PMI improved to 55 from 44 in April, which is remarkable. Restart of manufacturing units of automobile and other plants lent support to the prices. Copper remained in upper zone. Bank of America analysts increased their price forecast for copper in 2020 by 5.4% to $5,621/t, while keeping the 2021 projection unchanged at $6,250/t. Despite rise in steel prices in China nickel didn’t see much upside outside China as a wider recovery is probably needed or a sharp rundown in inventory.

Mandies are gradually reopening and trading activities have improved. Now the supply side has improved and offtake also got improved, injecting more volatility in futures platform. In agri commodities, some of them really performed well. Mustard saw nonstop nine week rally and it was trading above 4600 mark on better crushing demand amid tight supply due to some restriction in transportation. In spices, jeera prices flared up whereas turmeric and coriander saw downside. In the present scenario, the auction of Jeera is being auctioned at the agricultural produce market committee on alternate days. After a gap of more than 60 days, cardamom auctions resumed at Puttady. Soyabean moved up on strong demand from China. State-owned Chinese firms bought at least three cargoes of U.S. soybeans on Monday, even as sources in China said the government had told them to halt purchases.

NCDEX TOP GAINERS & LOSERS (% Change)

WEEKLY STOCK POSITIONS IN WAREHOUSE (NCDEX)

MCX TOP GAINERS & LOSERS (% Change)

WEEKLY STOCK POSITIONS IN WAREHOUSE (MCX)

WEEKLY STOCK POSITIONS IN LME (IN TONNES)

PRICES OF COMMODITIES IN LME/ COMEX/ NYMEX (in US $)

MSP for Kharif Crops 2020-21

After a vehement shock by the Covid-19 pandemic, the government of India has taken the several steps to provide relief to the farm sector. One of them is to increase the minimum support prices of kharif crops for the current year. Generally increasing the MSP of crops to ensure remunerative prices to the growers for their produce is every year’s phenomena before arrival of monsoon. But this year is different as farmers and farming related activities have become more vulnerable in the lockdown situation than other sector as migrated labourers returned back to their native village and they will be extra burden on farming sector

The Indian government has decided to increase the minimum support prices of 14 kharif crops based on the formula by the commission for agricultural costs and prices. The return over cost for these 14 crops ranges from 50% to 83%.

The highest increase in MSP is proposed for nigerseed (Rs 755 per quintal) followed by sesamum (Rs 370 per quintal), urad (Rs 300 per quintal) and cotton (long staple) (Rs 275 per quintal). The differential remuneration is aimed at encouraging crop diversification.

The expected returns to farmers over their cost of production are estimated to be highest in case of Bajra (83%) followed by urad (64%), tur (58%) and maize (53%). For rest of the crops, return to farmers over their cost of production is estimated to be at least 50%.

Government’s strategy is one of promoting sustainable agriculture with diversified cropping pattern matching with the country's agro-climatic conditions, towards higher productivity without jeopardizing nation's bio-diversity. Support is in the form of MSP as well as procurement. Besides, with the intention of giving enough policy thrust to income security of the farmers. Government's production-centric approach has been replaced by income-centric approach.

In continuation with the above-mentioned measures, Government is taking holistic approach towards farming related activities. Efforts are being made to facilitate marketing of agricultural produce by the farmers. Advisories have been issued by the Union Government to State Governments / UT to facilitate Direct Marketing, enabling direct purchase from the fanners / FPOs / Cooperatives etc. by Bulk Buyers /Big Retailers / Processors by limiting regulation under State APMC Act.

INTERNATIONAL COMMODITY PRICES

Currency Table

News Flows of last week